Roots, a privately held Regulation A+ Real Estate Investment Trust (REIT), is using a mutually beneficial “win-win” model to make renting more rewarding for their tenants and themselves.
The “Live In It Like You Own It” model is simple: renters earn a rent rebate each quarter for being a good tenant. The relationship is designed to be mutually beneficial; Roots is able to encourage renters to take care of properties, pay rent on time, and be ideal tenants, while renters are able to potentially earn hundreds to thousands of dollars while renting. Additionally, renters can invest in the Roots fund, which goes to purchasing and managing those properties, and effectively be co-investors in the fund’s properties alongside their landlords.
Roots was started by Larry and Daniel Dorfman — father and son, respectively — along with Scott Jacobsen in July of 2021. Daniel’s roots in real estate, however, date back even further.
“In 2009, I started my first company, a wholesale software company, and I had a decent payday for the first time in my life; I was kind of like, alright, what do with the money — I don’t want to just spend it, and I didn’t really understand the stock market,” Daniel said.
At the time, his then-girlfriend (and now wife) was planning to enter the real estate scene, and the two soon became co-investors. Daniel said he quickly came to love the idea of a tangible asset, and that this asset could provide a home for somebody.
This foundation in the industry would eventually help Daniel, now CEO, co-found Roots. In 2020, over a decade since his first real estate development Daniel said and his partners realized that though they were having financial success, they felt like they weren’t doing much beyond putting a roof over peoples’ heads.
This led to conversations about helping their renters gain some equity in the market that had helped Daniel and his co-investors build their wealth. After surveying available options like rent to own and seeing low conversion rates, the team decided to form their own system, which became the “Live In It Like You Own It” model.
“We wanted to rethink the way that real estate works and reimagine the relationship between landlord and tenant, and we crafted something where we have partners in our buildings who are getting to participate in the solution and not something that would be considered the problem,” Daniel said.
Since the program started, around 230 units across 114 properties have been rented under this model. Katie McManus is from Atlanta and has lived in a Roots rental property for over a year; she said she is pleased with the irregular model.
“I had some speculation; usually with renting it’s like the landlords don’t really care about your well-being, so I was a bit skeptical at first. But as the months went on, it became more clear that they’re doing this to benefit themselves but also benefit the community — so I think that’s pretty awesome.”
McManus added that she has been pleased with the overall responsiveness to any problems that arise.
From day one, Daniel said, renters can invest fees like security deposits into the investment portfolio. Essentially, they become a slight owner of the property, with an incentive to take care of it to help the value of it appreciate.
In addition, renters can receive rental rebates if all requirements are met — things like paying rent on time, being a good neighbor, and recording a half-minute video of the inside and outside of the property to ensure things are being kept up to standard and identify small repairs before they become larger issues. These rebates are, on average, $150 into their investment account or $600 into the investment account each year. Additionally, if renters meet their quarterly requirements four times in a row, they earn a $200 bonus for a total of around $800 for the year.
Daniel said that if all goes well, tenants will leave with an investment portfolio larger than when they began renting with Roots.
“The average renter [in the U.S.] has less than $650 in savings [in median cash savings], and our average resident who has lived with us for over two years has over $2500 in their wealth-building account,” Daniel said, adding that after five years, successful residents could have around $8500 to $9000 assuming the fund performs well. “That’s a great starting point for them to be successful in their next phase of life.”
The success is felt by Roots, too. Renewal rates are around 80 percent for residents renting with Roots, compared to a national average of around 57 percent, which helps from funds operating standpoint and also signals success of the program. The investment fund boasts a 93 percent occupancy rate as of April 2024, and a 48 percent total return since the July 2021 start.
There are currently around 5200 investors in the fund, and residents are treated as true investors, being able to participate in the investor calls.
“We invite all of our residents to be on our investor calls, and it’s really amazing to watch them come in and ask questions and participate in the overall fund,” Daniel said. “We’ve had over 16 percent annualized returns for our investors.
As of now, Roots is localized in Atlanta, and all properties are within 20 miles of Downtown. The investment trust has even been able to work with Atlanta Housing in the past, Daniel said, to accept housing vouchers — another initiative that excites him.
“I was born and raised in Atlanta; the city we want to impact is Atlanta… we love the idea of impacting this city as much as we can. We’re workforce housing, so a lot of our homes are between 1500 and 1900, and a vast majority of them are rented out under 80 percent AMI,” Daniel said. “So our objective here is to continue impacting the lives of the renting community in Atlanta.”
Nevertheless, Roots lists six cities of expansion in the future: Nashville, Chattanooga, Birmingham, Greenville, Charleston, and Charlotte.
Daniel said they recently had their first resident go and buy their first home.
“Was it because of all the money they saved with us? No, but were they able to leave with $3000 and fix a weather heater that went out? Yes — and they sent us the nicest note ever because of it,” Daniel said.
Roots has made their resident engagement software available to owner-operators across the country, with hopes that more people join in investing in both homes and a positive resident-tenant relationship.
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